Download - Chapter 10 Benchmarking
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Chapter 10
Benchmarking
Team #1: John Boyd, Greg DeYoung, Tusi Marshall and Dave Wilson
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Introduction To Benchmarking
It is a tool that is used by many businesses To gauge their performance with best-in-class
businesses within their own industry This tool allows for the standardized
measurement of business and organizational metrics
To use this comparison with best-in-class business and organizational metrics
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What Is Benchmarking?
Can yield great benefits in the education of executives
And in the realized performance improvements of operations
In addition, benchmarking can be used to determine strategic areas of opportunity
In general, it is the application of what is learned in benchmarking that delivers the marked and impressive results so often noted
The determination of benchmarks allows one to make a direct comparison: any identified gaps are improvement areas.
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Benchmarking Defined
"Benchmarking is the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders (Best in Class)"
Source: The Xerox Corporation
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Reasons to Benchmark
To identify, understand and implement Best Practices
To overcome complacency To build and reinforce broad commitment to
change To achieve quantum leaps in improvement
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What Is “Best Practice”?
Documented strategies and tactics employed by highly admired companies
These companies are not "best-in-class" in every area - such a company does not exist
But due to the nature of competition and their drive for excellence, the profiled practices have been implemented and honed to help place their practitioners as the most admired, the most profitable, and the keenest competitors in business.
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What Benchmarking Is NOT
Merely competitor analysis: Benchmarking is best undertaken in a collaborative way.
Comparison of league tables: The aim is to learn about the circumstances and processes that underpin superior performance.
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What Benchmarking is NOT
A quick fix, done once for all time Benchmarking projects may extend over a
number of months and it is vital to repeat them periodically so as not to fall behind as the background environment changes.
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What Benchmarking Is NOT
Copying or catching up In rapidly changing circumstances, good
practices become dated very quickly. Also, the fact that others are doing things differently does not necessarily mean they are better.
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To Benchmark Successfully
A shared, common vision of the performance improvement goals and objectives
Open and committed high level support The commitment of all stakeholders in the process to
progress and change Ability to critically examine ONE’S own practices The ability and willingness to co-operate and share
information and expertise with others Able to learn from others’ best practices Flexibility to implement the necessary changes Procedures to monitor subsequent progress
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Types of Benchmarking
Internal External (competitors) External (same industry) External (generic)
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Benchmarking Process
Identify activities and practices to benchmark Collect data from organizations that have
recognized accomplishments in the activity Suitable "benchmarkers" may include primary
competitors, other divisions in a larger organization, and "world class" performers in a particular area Be prepared to share as much information as
you receive from benchmarking partners.
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Benchmarking Process
Integrate and analyze the data Act on the information collected by
implementing features that can be adapted to your own organization
Monitor improvements and conduct ongoing benchmarking
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Benchmarking Process Summary
Decide what to benchmark Understand current performance Plan Study others Learn from the data Use the findings
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Deciding What To Benchmark
Diversity in “Best of Class” levels Where are you?
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Quiz Scores
Excellent! Your company is at the creative vanguard.
We're going to do two things right now: buy some of your stock, and see if you have any job openings.
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Quiz Scores Not bad! The firm is probably attracting enough good people and
generating enough creative thinking to stay in the game. It sounds like management is at least trying, so maybe you should pitch in and help this crew move up the scale.
Get out of Dodge, pardner. The Surgeon general has determined that the company you
work for is hazardous to your physical and mental health.
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Quiz Scores
Nahh....Can't be! Those (d) answers were supposed to be jokes. You
know, jokes, like the pointy-haired guy in that comic strip?
Deficient – Soon, the board is going to send in a turnaround team. Let’s hope they turn it around in the right direction. Update your resume & don a life jacket.
Very good – Your company gets it (or most of it, anyway). You’d have to look long and hard to find a better place to work.
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Approaches to Benchmarking
AT&T 12-step Process: Determine who the clients are – who will use
the information to improve their process Advance the clients from the literacy stage to
the champion stage Test the environment. Make sure the clients
can and will follow through with benchmarking findings
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Approaches to Benchmarking
AT&T 12-step Process (cont): Determine urgency. Panic or disinterest
indicate little chance for success Determine scope and type of benchmarking
needed Select and prepare the team Overlay the benchmarking process onto the
business planning process
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Approaches to Benchmarking
AT&T 12-step Process (cont): Develop the benchmarking plan Analyze the data Integrate the recommended actions Take action Continue improvement
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Approaches to Benchmarking
Xerox 10-step Process: Identify what is to be benchmarked Identify comparative organizations Determine data-collection method and collect
data Determine current performance gap Project future performance levels
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Approaches to Benchmarking
Xerox 10-step Process (cont): Communicate benchmark findings and gain
acceptance Establish functional goals Develop action plans Implement specific actions and monitor
progress Recalibrate benchmarks
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Example of Benchmarking Results
Norwest, the nation’s largest mortgage company, embarked on a benchmarking campaign, and was able to quantify the following benefits:
Sales brochure consolidation: $430,000 in savings; Customer and direct mail consolidation: $1 million in savings; Opportunity lending: $20 million in added growth; Teller referrals: up 15%, 33% of which result in additional sales; Use of sales road maps: sales increase up to 102%; Use of partner letters: 150% increase in commercial sales; and Performance Coaching: 5.08 products per new customer.
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Understanding Current Process
To compare practices it is important to determine, understand and document the current practices
Can be helpful to chart and diagram flow and processes
Important to clarify normal routine processes with special exception processes
Important to quantify a process with a unit of measure
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Planning
If not already chosen – a benchmarking team should be picked
Choose your type of benchmarking Internal Competitive Process
Identify the best firms to find a benchmark A “short list” of possible benchmark partners
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Studying Others
Benchmarking studies look for two types of information Description of how best-in-class processes are
practiced And the measurable results of these practices
Techniques for conducting original research Questionnaires Site visits Focus groups
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Learning the Data
Involves answering a series of questions Is there a gap between the organization’s
performance and the performance of the best-in-class organization
What is the gap? How much is it? Why is there a gap? What does the best-in-class do that is better? If best-in-class practices were adopted, what
would be the resulting improvement?
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Learning the Data
Benchmarking studies can reveal three different outcomes A negative gap Equal or parity Positive gap
Identifiable benchmark gaps must be described and quantified
Determine the root causes of the gaps
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Using Findings
Generic steps for the development and execution of action plans Specify tasks Sequence tasks Determine resource needs Establish task schedule Assign responsibility for each task Describe expected results Specify methods of monitoring results.
Goals and objectives should be consistent with the execution of the action plan – end result is process superiority
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Pitfalls & Criticisms
Benchmarking for the sake of it Focusing entirely on comparisons of
performance measures rather than the processes and activities that enable the achievement of good practice
Expecting that benchmarking will be quick or easy
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Pitfalls & Criticisms
spending too long on one part of the process at the expense of other key parts particularly, obtaining support for your recommendations
expecting to find benchmarking partners comparable in all respects to your organization
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Summary
Benchmarking is not a panacea, a strategy, or business philosophy
It is an improvement tool To be effective, it must be used properly It is a source of ideas from outside the
organization Benchmarking forces an organization to set
goals and objectives based on external reality
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Class Exercises
Identify the three main types of benchmarking?
What is a metric? How are metrics used?